Important TIF Changes Make It Into Law

I'm really late to this news, but thanks to Thomas Heller out of Columbus, IN, I do finally have it.

This past Legislative Session actually took a couple of significant steps to reign in how TIF (tax increment finance) districts are operated.

HB 1116 made it into law with a litany of changes to the way a wide variety of governmental units manage the revenues they garner from property taxes.  From libraries to townships to school districts to municipal governments and more - there's something for everyone in this bill.

Winnowing it down to factors relevant to TIF districts we end up with three items:

It requires the MDC to submit an annual report to the Council and for the Council to forward that information to the State.

It revamps the way the value of the base is calculated each year; limiting any decrease in the value of the base to that caused by lower property values.

It calls for the Legislative Council to set up a study committee on TIFs. 

A reminder on the jargon - the base is supposedly set on day 1 of the life of a TIF district and is the total value of all property then existing within the footprint of the TIF district.  The fairytale always told is that that value will remain in the base and the taxes derived from it will always and forever flow to the schools and libraries and cities and towns.  The increment is supposed to be all the growth in value due to new construction and redevelopment (not just inflation).

The reality is that each year, the County Auditor must submit to the State Department of Local Government Finance, a form for each and every TIF district that recalculates the base.  We have seen considerable erosion of the base of our TIF districts in Marion County over the years due to the calculations handled on these forms (TIF neutralization forms), with base value being converted forever into increment value.   Such is our problem here in Marion County, that 16 of our 40 TIFs have seen their base drop to zero, including 5 of 6 components of the much vaunted consolidated downtown TIF.

In trying to recreate how the TIF portions of this bill flowed through the session, it seems the introduced bill included only the method for the annual recalculation of the base (TIF neutralization in TIF-speak).   At some point after it got to the Senate, this part was deleted.  During the Conference Committee, it was added back and the other two items (MDC report to Council requirement and call for a study committee) were added new.

The MDC (our redevelopment commission) must submit a report to the Council by August 1 each year.  The report must include revenues received, expenses paid, fund balances, the amount and maturity dates for all bonds, and the amount paid on bonds for each TIF district.  Also, a list of all parcels included in each TIF district along with the base value and increment value for each parcel.  The Council has until October 1 to compile the information and submit it to the DLGF.

This would, of course, open all of this information up to the general public as well.

According to the Legislative Services Agency, who evaluate every bill for its fiscal impact, the current law requires the MDC to submit a more abbreviated report to the Mayor each year.  I'm sure he reads it, too.

Because of HB 1116, the law now protects the base from any erosion, except when the assessed value of the property in the TIF district decreases - as in an either local or widespread recession.  This reasserts the promise made when TIFs are created.  In non-recession times, the base would grow along with the value of the property as determined by the County Assessor.  As the LSA puts it, increased base values "would result in lower tax rates and potentially lower circuit breaker losses" to schools, libraries and city governments.  I've noted before that half of all circuit breaker losses can be directly attributed to our TIF districts.

One unfortunate aspect of this change, is that those TIF districts whose base have already dropped to zero will never see the benefit of the new law.  But, it is good that at least one of the fairy tales used to sell the public on a TIF will be made reality, finally.

 

And last but not least, the study of TIFs at the state level is long overdue.  There is so much hocus pocus and shenanigans going on with TIFs that overhaul is needed in order to protect the public.  While I'm usually more apt to back home rule, the actions of our city fathers and mothers to dismantle and ignore the recommendations of our own TIF Study Commission shows how little we can trust them to move forward in the public interest, over the interests of select individuals.

The state enabled TIFs decades ago. Slowly, as problems have come to their attention, they have enacted changes to the law to reign in bad practices. Maybe a decade ago, after seeing abuse of the bonds tied to TIFs, they said that any bond paid with property taxes could be refinanced only if the term was not lengthened nor the payment increased. Last year they limited the life of any newly created TIF district to 25 years. And this year, they stepped forward to protect the base. Now, if only they could turn their attention to limiting the fraction of property value that can be caught up in TIFs, and forcing the sunsetting of existing TIFs once their current bonds are paid off...

What's Going On With TIFs?

For the second consecutive meeting of the Metropolitan and Economic Development committee, the Mid-North TIF (prop 291) was postponed - now to November 26.  Ostensibly it was due to sponsor Councillor John Barth's drafting of an amendment, which he told a couple of us who attended the meeting, was still a concept in his head.  He did promise to have the Council office post his amendment online in advance of the November 26 in order to give the public a chance to review it prior to that meeting.

The committee also postponed to November 26, two proposals on the TIF Study Commission recommendations - Prop 274 urging the MDC to adopt those recommendations pertinent to them, and Prop 275 urging the General Assembly to adopt recommendations that fall in their wheelhouse.  Although these proposals were introduced before the Mid-North TIF proposal, this was the first time they were actually placed on a committee agenda.

Also being delayed from any actual agenda, is the reintroduced TIF proposed for the Meadows area - formerly Prop 16, declared dead when Prop 15 was not.  This is the proposed expansion of the Fall Creek TIF and now is alive as Prop 349.

The Council has 45 days to put an introduced proposal on a committee agenda, and November 26 will come in just under the wire at 42 days.

Tonight's Rules committee meeting will entertain Prop 316 for the second time.  This proposal seeks the enactment of the TIF Study Commission recommendations that the Council can do something about.  You will recall that Barth authored a poison pill amendment that would have gutted the recommendations, the last time the committee met.  (see "Dust Up For Reasons Unknown - But I Speculate Anyway") We shall see if he still tries to do so.

It is obvious that the Democratic caucus is dysfunctional when it comes to TIF policy.  That is very unfortunate for the economic health of Indianapolis going forward.  We simply cannot absorb square mile after square mile of new TIFs - ones that primarily benefit well to do areas of our City to boot - without harming all of our governmental units' ability to deliver the services we are actually paying taxes to get.

Tonight is an opportunity to return the horse to the front of the cart, and let the Council adopt the well considered recommendations for full disclosure, transparency, and accountability that the public deserves regarding TIF district establishment and maintenance. 

Matt Tully - Wrong on TIFs - Not Just Merely Wrong; Most Sincerely Wrong

There is no doubt the IndyStar columnist, Matt Tully, is a talented writer.  As a person, Tully's opinion is of no more importance than the next guy's.  As a paid opiner for the Star, with its wide reach, his opinions are amplified in the community.  With that reach, and with being a journalist, one would hope Tully would be fastidious in checking what he promotes as facts.  Unfortunately, in his column on the proposed Mid-North TIF, Tully fails the accuracy test.

Tully repeats that tired old fairy tale that TIFs only capture new development.

First, the TIF captures only new property tax revenue -- meaning money from new investment over and above what is already collected.

We see this year, where $490 million of base - which is the 'old stuff' - in Marion County's TIF districts, was converted into increment - which is, according to the fairy tale, supposed to be only the 'new stuff'.  That's a full third of the existing base.  How much time would it take to accumulate an additional $490 million of property value for our tax roles through development?  And yet, in one year that huge amount of property value is yanked from producing tax revenues for the schools, libraries, IndyGo, Health & Hospitals, fire departments, IMPD, parks, as well as the city-county government.

Where Tully gets alarming is where he promotes brand new fairy tales about TIFs.  He actually most succinctly framed the idea in a short twitter debate he had with Amos Brown a week ago.  Below is a screen shot of the back and forth so you can get the context in which Tully said

"If Midtown continues losing high income families that's a disaster for the city--particularly the most struggling parts of it."  Huh?  And, from the context, TIFs are apparently the answer.

Let's face it, a Mid-North TIF is a solution searching for a problem. 

Tully is promoting the idea that TIFs are designed to bring tax dollars into well to do neighborhoods to make them even better places to live so that rich people stay in Marion County.  His logic is other worldly when he can reach the conclusion that improving the lot of the well to do has a positive impact on those who struggle daily.

If it were just Matt Tully, a person, with this attitude, it would be part of the community conversation.  But, it is Matt Tully, the print media columnist, who is spreading this insidious meme that TIFs are for the better off areas.

You likely remember that extraordinary series of columns Tully wrote about the Meadows years ago now.  Where is that Matt Tully?  TIFs were designed to help just this type of neighborhood, where no dollars are going and a few dollars has a shot at making a real difference; first in the real estate, then in the lives of those who can't afford the rent in Tully's neighborhood.

If there were a prioritization of neighborhoods in need in this city/county, Meridian Kessler, Broad Ripple, and Butler-Tarkington wouldn't be anywhere near the top of the list.  Yet, they want to get theirs first, before the reality sinks in that TIFs have consequences, not all of which are good for Indianapolis and its future.

The last couple of years, Tully has taken immense amounts of time to experience IPS, and he penned riveting and pivotal pieces that helped to elevate the discussion of education in Indy.  Where is that Matt Tully?  Doesn't he know that existing TIFs already harm IPS' bottom line?  And yet he is promoting the creation of another square mile TIF in the IPS district. They call the downtown TIF the "dead zone", because of all the property value that does not send revenue their way.  IPS already has 22% of all taxable property within its district caught up in a TIF increment.  One-fifth.  That's twice the average for the County as a whole.  40% of the circuit breaker penalty (the property tax revenues that government qualifies for, but cannot collect due to the property tax caps) in the County can be attributed directly to TIF districts and their sequestration of property value.  With its higher percentage of property valued contained within TIFs than the County as a whole, one would estimate that TIFs cause an even greater percentage of the $15 million circuit breaker penalty that IPS will see in 2013.  What could IPS do with an extra $6 to $12 million a year more?

But this Tully, the one for whom there is no valid and valuable community conversation about TIFs going on, this Tully would add another square mile of untouchable tax revenue in IPS's district.  He seems to think that excluding residential property from the proposed Mid-North TIF is a positive.  But, lets face it, residential property has a 1% tax cap, and the TIF would capture the commercial values - which are higher in assessed value and which have 2 % and 3 % tax caps, so pay a greater proportion of property taxes from the same size lot.

Tully does columns on crime in a variety of areas in our city-county.  Yet, he doesn't mention that TIFs take revenue away from IMPD - not just shelter revenue from IMPD's grasp, but take it away in the form of the circuit breaker penalty.   According to Jeff Spalding, City Controller, the 2013 circuit breaker penalty will be over $5 million for IMPD and over $7 million for IFD.  As currently configured, the 2013 budget calls for no IMPD recruit class and one for IFD only if they can get their hands on a federal grant.  Again, at least 40 % of those circuit breaker amounts are directly attributable to existing TIFs.

Well, with or without Matt Tully, the community conversation about the reality of TIFs will continue.  Personally, I had hoped by this time our conversation would be about how much of our property value should be tied up in TIFs for the next 25 to infinity years.  Other jurisdictions that use TIFs and place a limit, set that limit at 5% of property value.  We are at 11%.  With the ramrodding of TIFs through the Council prior to the implementation of the recommendations of the TIF Study Commission, based on incomplete information, one has to wonder what generational damage these folks are doing.

Tully has a soapbox courtesy of the Star's circulation.  He also has a responsibility to be accurate with the facts he sprinkles throughout his columns to support his opinions.  On the TIF issue, he completely and utterly fails on the accuracy test.

Dust Up - For Reasons Unknown, But I Speculate Anyway

I have the greatest admiration for Councillor Brian Mahern, but last night he flubbed.

The Rules committee began their consideration of Prop 316, which would implement the recommendations of the TIF Study Commission.  After a thorough and really well done overview of the findings of the Commission, Councillor Bob Lutz introduced an amendment that would strike the very last part of Prop 316:

(d) Any proposal creating or expanding a TIF allocation area must be approved by a standing committee of the council before it can be considered for adoption by the full council.

The discussion, which actually preceded the motion to amend, revolved around current Council rules and how the proposed change would impact the ease with which the full Council could call a TIF proposal out of committee.  Currently, if a committee kills or votes down a proposal, the full Council can call it out of committee by the vote of a simple majority; or 15 votes.  This change would require the suspension of the rules in order to call a TIF proposal out of committee, which requires a 2/3 vote; or 20 votes.

After the motion and a second, Mahern refused to take a vote and asked to postpone the proposal until the next meeting of the committee.  He said postponing would allow time to discuss this amendment as well as one Councillor John Barth would be introducing.  He noted that Barth's amendment was only received that afternoon.  There was no second to his motion.  Mahern then tried to move off Prop 316 and on to the next agenda item.  After some brief, heated discussion, a recess was properly motioned and voted on.

After the recess a vote was taken on Lutz' amendment and approved by a vote of 5-1, with Mahern being the lone dissenting vote.  Then there was a motion and second to postpone further consideration of Prop 316 until the next meeting.  That vote was 4-2, along party lines.

I got no indication from the cheap seats why Mahern was so intent on getting the proposal to the next meeting.  While I would welcome a requirement for a super majority vote on any TIF proposal, it didn't seem to rise to the occasion of clearly violating parliamentary procedure in order to avoid a vote.

Barth's amendment was available at the Secretary's table.  This amendment would gut the entire proposal.  Barth is promoting his own TIF for his own neighborhood - Prop 291; the Mid-North TIF (see "The Mid-North TIF -- Developer Driven and Sans Critical Financial Details").  He introduced his proposal at the last full Council meeting.  Prop 316 was introduced at the same time.  One might expect, therefore, that any implementation of the recommendations of the TIF Study Commission would not apply to the Mid-North proposal.  But, Prop 291 was not placed on the Metropolitan & Economic Development committee agenda for Monday night, and it will not be until after the next full Council meeting that the committee would take it up.  So, as of yesterday morning it looked as if the TIF recommendations would indeed apply to the Mid-North TIF.  I can't read minds, but it is very suspicious that Barth introduced his amendment just hours before the meeting and that amendment would gut the entire list of recommendations contained within Prop 316.

Besides a technical correction, Barth's amendment would add one line to section (b) of Prop 316.  Here is (b) with the added sentence underlined:

(b) The factors set forth in subsection (a) [which enumerated the recommendations] are not exclusive, and the council may consider any other factors it deems appropriate in exercising its discretion to approve or disapprove proposals under I.C. 26-7-15.1(9)(a).  Likewise, the absence of any factor or part thereof does not limit the council's discretion to approve or disapprove a proposal.

With that last sentence included, none of the recommendations would be securely implemented.  The administration, or any that follows, could continue its pattern of withholding key financial information from the Council.  That information is necessary to a realistic look at the TIF being proposed.  Without that information the Council cannot make an informed decision and it cannot carry out its duty to review and vote to approve or disapprove as required by law.

TIFs do not generate free money, as many continue to believe.  TIFs have consequences, as many continue to avoid believing.  TIFs always caused increases in property tax rates.  Now they increase substantially the circuit breaker penalty caused by the property tax caps.  Property tax caps that were voted on by the people.

In this age of property tax caps, it is time for the Councillors to learn about the reality of TIFs. It is time to act as the fiscal body of our City that is different from the Mayor's office and that has a distinct role and responsibility.  It is time to demand full disclosure on proposed TIFs so that a reasoned decision about TIFs can be derived.  It is time to implement, not blow off, the Council's portion of the TIF Study Commission recommendations. 

Finally - TIF Study Commission Recommendations At Committee

The TIF Study Commission did extraordinary work - and its knowledge base should be used by each and every Councillor in order to do what is best for Indianapolis.

The recommendations that pertain to the Council are being considered in Prop 316, which is being heard by the Rules committee tonight, beginning at 5:30 pm.  The agenda notes room 260, but it would be really nice to see such a crowd of supporters that it had to be moved to the public assembly room.

The meat of prop 316 is cut and pasted below.  The bottom line is that it will require full disclosure from any administration wanting to create or expand a TIF district.  Its a first.  Its important.

Here are the recommendations in the proposal:

SECTION 1. Chapter 151, Article VI of the Revised Code of the Consolidated City and County is hereby amended by adding a new Section 151-88 to read as follows:

Sec. 151-88. Special requirements for consideration of proposals concerning creation and expansion of allocation areas under I.C. 36-7-15.1.

(a) In exercising the council’s discretion under I.C. 36-7-15.1-9(a) to “approve or disapprove” proposals creating or expanding tax increment financing (TIF) allocation areas under I.C. 36-7-15.1, the council and its committees shall consider the following factors:

(1) Whether the city has provided a cost/benefit analysis that includes a description of how the project plan aligns with the county-wide comprehensive economic development planning document; a description of how the project plan aligns with the local/neighborhood planning document; a market analysis of the existing, possible or likely future free market unsubsidized private development in the proposed geographic area; an analysis of recent changes in the assessed value in the individual parcels located within the geographic area of the proposed project; and an analysis of use of a project TIF as compared to a TIF district.

(2) Whether the proposed geographic area of the proposed TIF district would include parcels that are in the process of being improved, even if not substantially complete enough to be assessed and added to the county’s inventory of taxable property.

(3) Whether the city has created and implemented a uniform TIF application, employing best practices and including all information needed to evaluate the proposed project and all data elements required for a TIF database, including a financial pro forma.

(4) The extent to which the city has employed the use of alternative or complementary economic development tools and infrastructure funding prior to the use of TIF.

(5) Whether the proposal minimizes the duration of the TIF district to the amount of time reasonably required to accomplish both the economic development goals of the TIF district and to provide for the permanent return of incremental assessed value to the base taxing units as soon as possible by decommissioning the TIF district.

(6) Whether the proposed TIF district targets the use of tax increment financing in a targeted, limited and compact geographic area.

(7) Whether the existing TIF districts in the jurisdiction of the redevelopment commission have sunset dates established.

(8) Whether the existing dormant or partially dormant TIF districts in the jurisdiction of the redevelopment commission have been terminated.

(9) Whether the proposal would expand an existing TIF district that does not have an established sunset date.

(10) Whether the proposal is for redevelopment projects or economic development projects.

(11) Whether the proposal includes local hiring goals and MBE/WBE participation goals.

(12)Whether the proposal includes provisions for educational, work training, and worker retraining programs.

(13)The extent to which the base taxing units and community organizations that may be impacted by the creation or expansion of a TIF district were included from the beginning of the process and provided with meaningful economic impact analysis including projections of foregone revenue, not limited to current financial reporting requirements in state law.

(14) Whether the city has adopted semi-annual local reporting requirements, including a three-year capital spending plan for pay-as-you-go projects and other estimated spending for eligible uses of TIF funds.

(15) Whether the proposal includes accountability and remediation requirements for the performance of the TIF district, including progress reports measuring performance against stated goals at the time the district was established.

(16) Whether the proposal captures more incremental revenue than is necessary to cover debt service and reasonable reserves for the associated projects.

(17) Whether the city has established a uniform documentation, reporting, tracking and monitoring system for TIF districts and projects, including a TIF database and a TIF website which would be a repository of the TIF data and information made available to the public.

(18) The extent to which the proposal would remove from the base the incremental assessed value of projects that were completed or substantially completed before the adoption of the declaratory resolution.

(b) The factors set forth in subsection (a) are not exclusive, and the council may consider any other factors it deems appropriate in exercising its discretion to approve or disapprove proposals under I.C. 36-7-15.1(9)(a).

(c) Prior to voting to approve or disapprove a proposal creating or expanding a TIF allocation area, a council committee must publish notice and an agenda of the meeting at least ten (10) days in advance, and the proposal must be specifically included on the noticed agenda.

(d) Any proposal creating or expanding a TIF allocation area must be approved by a standing committee of the council before it can be considered for adoption by the full council.

Mid-North TIF - Developer Driven and Sans Critical Financial Details

A letter to the editor in yesterday's Star, signed by Councillor John Barth and leaders of a number of Mid-North Neighborhood Associations, claims that the proposed Mid-North TIF is not developer driven.

Hogwash.

Developer Leif Hinterberger testified a number of times at the TIF Study Commission.  During his testimony he noted the several years he has been working with Ryan Vaughn, and also listed a number of people in the City administration who he claims promised him that a TIF would be created to fund his project.

The project is 'The Uptown', on the northwest corner of 49th & N. College; a mixed use project of retail and residential.  The southern half of the block is owned by 49-50, LLC, whose agent is Leif Hinterberger.  The northern half of the block was owned by Leif Hinterberger, but recently sold to a Tom Melangton.

Many of these neighborhood groups signed letters asking for quite a bit of public money resources to be aimed at this project.

HOME funds and CDGB grants
Indiana Housing and Community Development Authority tax credits and grants
tax abatements
infrastructure curtesy of DPW
 

The entire block has been subject to a very large number of high weeds and grass complaints, forced mowing and legal action in environmental court, as well as a Health & Hospital demolition order on a building at 4902 N. College.

The Mid-North TIF as proposed (Prop 291 now before the Council) encompasses over a square mile of real estate.  The footprint is known, but nothing else has been disclosed to the public.  This is another pig-in-a-poke being pushed through before full disclosure is required through the passage of Prop 316.

If you take a peek at Prop 291 you'll see next to nothing as far as information, valuable or not, contained in it.  The MDC resolution, which I uploaded to Google Docs, does have the list of 1971 parcels contained in the footprint along with a map. 

Almost 1/3 is in Center Township and the remainder is in Washington Township.  All appears to be within IPS' district.  Center Township already has 30% of all taxable property contained within the increment of a TIF district.  IPS has 22% of all taxable property contained within the increment of a TIF district - what's another 700 some acres and over 1 square mile more.

And, lets not continue with the fairy tale that only new property value will have its property taxes diverted from IPS and placed within the TIF fund.  16 of 40 TIF districts have seen their base converted entirely to increment over the years.  So there is a track record that strongly suggests a high probability that the current value of property within the footprint will partially or entirely become another dead zone for contributing to the services of IPS, and the city-county.

Yes, the proposed Mid-North TIF is entirely project and developer driven.  And it puts an unknown amount of property value at risk, and stands to drive even higher the $15.2 million that IPS qualifies for but cannot collect because of the property tax caps.

If there is financial evidence that any of this is leaping to erroneous conclusions - the City has not provided it to the public.  With a lack of evidence to the contrary, we must conclude that past performance is the only indicator of future performance that we have.

First Do No Harm - Impact of TIFs - Wayne Township

In my last two posts I mentioned the fairy tales that are promulgated in order to sell TIF districts. In case you are reading this entry because of its Wayne Township focus, let me repeat some significant fairy tales and facts.

Fairy Tales Used To Sell TIFs:

First, the taxes that flow from the district before the TIF is set up will continue to flow to the schools and libraries and other taxing units, just like before. Second, the project being funded is just the thing to spark other, privately funded, economic development. This boost in economic development will spur an increase in property values that will pay for everything and we'll all be better off.

Little Know Facts About Marion County TIFs:

• taxes promised to continue to flow (the "base") have been shifted over to pay off TIF bonds and expenses (the "increment") (see "Marion County's TIF Districts See Base Erode By Nearly Half a Billion Dollars in One Year"),
• tens of millions of dollars from income taxes, other TIFs, and additional property taxes have been poured into existing TIFs to shore them up (see "Big Time Bailouts of Indy's TIFs"),
• most TIF districts have been growing more slowly than the County as a whole (see "Most Marion County TIF Districts Underperform the County As a Whole"),
• existing TIF districts cause 1/3 of the circuit breaker penalty, directly causing $43 million reduction in collectable taxes and a concomitant reduction in services (see "Frist Do No Harm - Impact of TIFs - Marion County As a Whole")

On Monday night the Council is set to consider Prop 15, which seeks to expand the consolidated downtown TIF in two directions - to the east by 112 acres to finance development on 0.8 acres and to the west by 604 acres to finance development on a couple of blocks.

Shouldn't the impact of current TIFs be considered before more TIFs are piled on?  Unfortunately for all residents of Marion County, but particularly for those in Center and Wayne Township, Councillors did not ask a single question about Prop 15 at the August 27 meeting of the Metropolitan & Economic Development committee meeting.  It was an appalling affair for many reasons.  And the lack of prudent public representation was part of the reason it was appalling.

There is a huge impact on Wayne Township due to the existing TIFs.  Of all taxable property in Wayne Township, 10.9 % is in a TIF district increment and all property taxes flow to the TIF fund and not the schools, libraries, etc.

• for Speedway government and Speedway schools, 19.1 % of total property value is in a TIF
• for Wayne Township government and Wayne Township schools, 9.5 % of total property value is in a TIF

All of the Marion County TIF districts cause a combined

• $175 thousand increase in circuit breaker penalty to the Town of Speedway
• $20 thousand increase in circuit breaker penalty to Speedway City School Corporation
• $1.7 million increase in circuit breaker penalty to the Wayne Township government
• $3.4 million increase in circuit breaker penalty to the MSD Wayne Township School Corporation

There are 6 older and 1 new TIF district in Wayne Township.  None of them have a zero value for the base.

Of the 6 older TIF districts, there was a combined transfer of $118 million from the base to the increment.   Meaning that property taxes from $118 million of property value that was promised to always go to the schools, fire department, etc, is now transferred to the TIF so that it will now and forever be deposited in the TIF fund instead.

• $5.5 million of the amount transferred out of the base was in a Speedway TIF
• $112.9 million of the amount transferred out of the base was from TIFs within Wayne Township, but outside of Speedway.

This is a significant draw down.  The transfer of property value out of the base amounts to 4.4% of the property Wayne Township schools rely upon for funding and 2.0% of the property Speedway schools rely upon for funding.  The impact will be felt in increased taxes and increased circuit breaker penalties.

While very little of the proposed expansion of the downtown TIF appears to be in Wayne Township (the available map is grainy and very difficult to read), its impact needs to be viewed in light of existing conditions within Wayne Township and the impact of existing TIF districts on taxpayers and governmental units.

First Do No Harm - Impact of TIFs - Center Township & IPS

In my last post I mentioned the fairy tales that are promulgated in order to sell TIF districts.  First, the taxes that flow from the district before the TIF is set up will continue to flow to the schools and libraries and other taxing units, just like before.  Second, the project being funded is just the thing to spark other, privately funded, economic development.  This boost in economic development will spur an increase in property values that will pay for everything and we'll all be better off.

Hopefully I've put forward enough data from governmental sources to show that:

• taxes promised to continue to flow (the "base") have been shifted over to pay off TIF bonds and expenses (the "increment")  (see "Marion County's TIF Districts See Base Erode By Nearly Half a Billion Dollars in One Year"),
• tens of millions of dollars from income taxes, other TIFs, and additional property taxes have been poured into existing TIFs to shore them up  (see "Big Time Bailouts of Indy's TIFs"),
• most TIF districts have been growing more slowly than the County as a whole (see "Most Marion County TIF Districts Underperform the County As a Whole"),
• existing TIF districts cause 1/3 of the circuit breaker penalty, directly causing $43 million reduction in collectable taxes and a concomitant reduction in services (see "Frist Do No Harm - Impact of TIFs - Marion County As a Whole")

The two expansions of the consolidated downtown TIF contained in Prop 15, will have a particularly pointed impact on Center and Wayne Townships, simply because that is where they are located.

Now, there will be much handwaving about economic development - but no specifics released to the public to substantiate the claims.  I am willing to listen to substantiated claims, but find it patronizing and worse to have government officials simply wave their hands, when they are sitting on the financial analyses that will either prove or dispatch their handwaving claims.

I cannot understand why, if the handwaving is true, full disclosure of the financial underpinnings of the two expansions of the downtown TIF isn't being demanded by Council members.  If the handwaving is prop and show, then I can understand not divulging the information; facts might interfere with selling the TIF fairy tale.

The current impact of existing TIFs on Center Township and IPS are pretty staggering.  The following data are taken from the TIF Study Commission Report, Appendix 2, part two (pages 4 and 6).

for the year 2012 TIF districts

• within Center Township accounted for 33.3 % of all taxable property,
• within IPS boundaries accounted for 22.0 % of all taxable property

for the year 2012 all Marion County TIF districts caused

• an increased circuit breaker penalty to Center Township government of $214,770
• an increased circuit breaker penalty to IPS of $7,767,505

There are 21 TIF districts already in Center Townships - out of a total of 40 established TIF districts throughout Marion County and an 4 additional TIF districts created over the last year or two. Two of the 21 in Center Township are new.

Of the 19 older TIF districts in Center Township, 10 have seen their base erode to zero value. Combined, the 19 older TIFs saw their base erode this year by an additional $5.9 million - about 0.1% of the total assessed value of the base.

I do not have the computer models to discern the increased taxes paid by Center Township and IPS district taxpayers due to existing Marion County TIF districts.  But, the City does and could have provided that information to Councillors, had any been interested.

The City could also provide information to answer these questions:

• How much property value is in the base for the two expansions?
• What steps, if any, will be taken to ensure that the base is NOT reduced in future years?
• What is the cost to the public of the project at the core of the TIF district expansion?
• Why are you including parcels where private development is already slated over the next few years?  The TIF district will not be spurring those developments, they were happening already.
• Why do you need a 112 acre footprint to develop 0.8 acres in the Mass Ave expansion area and a 604 acre footprint to develop a couple of blocks in the Bush Stadium expansion area?  Are extra revenues anticipated over and above the debt service for the projects?  Does this amount to a slush fund for unnamed future projects that have not yet been disclosed?

And, that's just some of the questions that should have been asked.  But, they were not asked.

With the huge impact of non-taxable TIF district property already in Center Township and IPS, how on earth can two significant expansions of the consolidated downtown TIF district be contemplated with NO disclosure, beyond the footprints, being demanded by our Councillors?

First Do No Harm - Impact of TIFs - Marion County As a Whole

Many people in positions of power in the County prefer to sell the vision that TIFs create 'found money' that would not have existed but for the TIF, and that the property tax revenues that went to the schools and libraries and IndyGo before the TIF was set up will continue to flow to those units of government after the TIF is set up.

Either they don't know the difference between those fairy tales and reality, or they don't care.

TIF districts in Marion County

• do not fulfill the promise of catalysing economic development that would otherwise not happen (see "Most Marion County TIF Districts Underperform the County As a Whole",
• do not fulfill the promise of securing the property taxes that flowed before the TIF was created (the "base") (see "Marion County's TIF Districts See Base Erode By Nearly Half a Billion Dollars in One Year",
• need bailouts in the tens of millions of dollars every year (see "Big Time Bailouts of Indy's TIFs")
• cost property owners and renters more money, and
• cost the units of government in money they qualify to receive but cannot due to the property tax caps ("circuit breaker penalty").

From the TIF Study Commission Report, Appendix 2, part one (page 6) you can find the impact of the TIF districts on taxpayers and governmental units alike. In total, this table tells us that for 2012, the TIF districts in Marion County

• cost property tax payers an additional $56 million in increased taxes, and,
• cost schools, libraries, etc, $43 million in additional circuit breaker penalties to the governmental units.

Property taxes are passed through to renters, so even those who do not own property are on the hook for a higher cost of living because of TIFs. The loss of revenue to the schools, the library, IndyGo and more, results in loss of services - and $43 million can pay for a lot of services.

The percentage of taxable property tied up in TIF districts and which, therefore, do not contribute tax revenues to the schools, libraries, etc, varies from Township to Township.  From the TIF Study Commission Report, Appendix 2, part two (page 4) you can find the following percentages of taxable property tied up in TIF districts in 2012:

Marion County as a whole --- 8.9 %
Center Township --- 33.3 %
Decatur Township --- 14.0 %
Wayne Township --- 9.5 %
Lawrence Township --- 3.6 %
Warren Township --- 1.1 %
Perry Township --- 0.6 %
Pike Township --- 0.6 %
Washington Township --- 0.3 %
Franklin Township --- 0.1 %

The percentage of taxable property tied up in TIF districts in 2013 has grown to 11.1%, in large measure to $490 million of assessed value being removed from the base and given to the increment.  [The "base" is the part of the TIF district that existed before the TIF district was created.  The "increment" is the part of the TIF district that grew after the district was created plus any value taken from the base and turned into increment over the years.]

For next year, two more TIF districts will see their base drop to zero.  Out of 40 TIF districts, we will have 16 where ZERO tax revenues flow to the schools, libraries, IndyGo, etc.  For 2013 we see 3 TIF districts with an increased base, while 23 have a decreased base.

In the past 4 years we have seen $40.5 million bailouts of the Marion County TIFs districts.  These bailouts came from income taxes, garage receipts from city owned garages, transfers between TIFs, and, startling enough, from increased property taxes outside the TIFs to secure the TIFs.

One can only look at all of this information and conclude - Marion County TIFs are in trouble.  They continue to need more property value extracted from the base and continue to need other tax money to keep them propped up.  The more we keep property off the tax rolls or the more property value we add to the TIF increment, the more it costs taxpayer, residents and businesses to make up the difference.  And, the more property we keep off the tax rolls or the more property value we add to the TIF increment, the more it costs the schools, libraries, and IndyGo in noncollectable revenue due to property tax caps.

The TIF districts that we already have in Marion County are costing us a pretty penny each and every year.  They have not spurred development that would not have otherwise occur.   We should at least ask what impact any new TIF districts will have.  Yet, appallingly enough, not one question was asked about the proposed TIFs at the August 27 meeting of the Metropolitan & Economic Development committee meeting.  Such is the fairy tale and those who do not want to know about the reality of Marion County's TIFs.

What's Wrong With This Picture? - The Proposed Mass Ave TIF

Prop 15 proposes two expansions of the consolidated downtown TIF district.  A westward expansion of 604 acres, and an eastward expansion of 112 acres.  The latter is also known as the Mass Ave TIF, although about half of the acres are nowhere near Mass Ave.  The project area is less than one acre - by my calculations 0.8 acres, in fact.

But, see for yourself. 

I've actually been working on this for a few days and just waiting for one more piece.  I'll update you once I have secured that additional piece.  But, last night's maybe legal, maybe illegal, vote to push the TIF out of committee has hastened my schedule.  Helping me with information about the location of future proposed development has been Gary Welsh, author of the Advance Indiana blog and nearby resident.

I have uploaded all of these pictures in one document to Google Docs, so you can review them with as much zoom as you wish.



Proposed Mass Ave TIF - with Google aerial maps



Proposed Mass Ave TIF - outline

 

 

 

Proposed Mass Ave TIF - close up of East Area



Proposed Mass Ave TIF - close up of Mid Area



Proposed Mass Ave TIF - close up of West Area

The recommendations of the TIF Study Commission would protect the public interest by requiring disclosure of pertinent facts.  All of which would combine to address these questions:

Why this TIF?  Why this Place?  Why this Project?  Why this Footprint?

Its easy, once you see the outline of the proposed TIF, to want to know why a TIF is the best vehicle to fund the project?  Why not sell the block with the fire station and actually make money for the taxpayers to help build the new station?  Why not give the block away to the developer?

Why does the Mass Ave corridor require investment of public dollars at all?  The place is up and coming and a number of projects are already slated to begin within the next 12 months without a TIF and public dollars.

Why does this project need over 100 times its footprint to support it?  Or is the extra land included for other reasons, like setting up an extensive slush fund?  It is even said that the value of the already developed Trail Side project in the East Area will be immediately removed from the base (so current tax dollars will not continue to flow to the schools, library, etc) and included in the increment.

Indy's TIFs already cover 10% of Indy's property value.  It is irresponsible to pass this proposed TIF, or any TIF, without thorough evaluation and adjustment, if needed, or dismissal, if warranted.

[edited to add: I received a copy of the amendment to Prop 15 - it calls for excluding two properties from the TIF - 875 Mass Ave and 1201 Indiana Ave.  The former is the site of the Trail Side and the other is student housing next to the IUPUI campus.]

Big Time Bailouts of Indy's TIFs

The budgets for the last four cycles - from 2010 through the proposed 2013 annual City-County budgets, show massive taxpayer bailouts of most of Indy's TIF districts.  These would be Mayor Ballard's budgets.

Here are the links to the budgets, from which I pulled all the numbers I'll be noting in this blog entry:

2013 budget

2012 budget

2011 budget

2010 budget

Contained in these budgets are catchall funds for the various TIF districts that combine some TIF districts in one fund, and others in other funds.  Please note that the currently proposed 2013 budget does not include a very important fund - the "TIF Revenue Bond Fund" - the one that covers the income and expenses for the combination of the Consolidated Downtown TIF and the Consolidated Airport TIF. This budget proposal also does not give any detail as to which fund transfers came from which, or went to which, other fund.  That information, however, is included in the other budgets.

Three other TIF funds are the ones I want to go into.  There is the "Redevelopment General Fund", the "Redevelopment District Sinking Fund", and the "Economic Development Revenue Bonds Fund".  All take in property taxes from the rest of the TIF districts besides the downtown TIF and the airport TIF.

Here is the short summary.  Over these four budgets, the property tax revenues from the non-downtown and non-airport TIF districts amounted to $53.3 million.  But that was far from the amount needed to cover their costs, which totaled $80.0 million.  They also received an infusion of cash from other taxpayer monies:

$1.2 million from Local Option Income Taxes
$6.1 million from garage operation receipts
$16.6 million transfers from the downtown and airport TIFs
and - wait for it
$16.6 million from additional property tax levies that all of those properties outside the TIFs paid

It bears repeating, property taxes OUTSIDE the TIFs was raised to cover costs associated INSIDE the TIFs, in addition to income taxes and transfers from two better performing TIFs.

This should give all of those in the Ballard administration who are pushing the new TIFs and those Councillors contemplating the new TIFs, a lengthy and pregnant pause.  Taxpayers should demand that no new TIFs are forced through before the recommendations of the TIF Study Commission can be implemented.  These recommendations would not ban TIFs.  They would simply require full disclosure on the proposed TIF so that an educated evaluation of each proposal could be made by the Council, as well as by the taxpayers who will continue to pay for bad TIF decisions - and pay far more than they are clearly told about.

It is not asking much that the lies about TIF districts cease.  We should be given enough information to be able to evaluate - why this TIF, why this place, why this footprint, and why this project.  Instead we are getting almost no pertinent information and much that is available for disclosure, is being deliberately kept from the public.  This is an outrage that all Councillors should demand stop immediately.

One more item that  needs to be shown the light of day in the proposed 2013 related to the "Economic Development Bonds Fund".  In last year's budget ordinance covering the 2012 budget, it was estimated that this fund would have an end of year 2012 cash balance of POSITIVE $5.3 million.  Now they estimate an end of year 2012 cash balance of NEGATIVE $2.0 million and project an end of year 2013 cash balance of NEGATIVE $6.7 million.  What happened to cause a $7.3 million swing in the 2012 budget for a fund whose annual costs amount to only $4 million. You draw your own conclusions as the validity of the budget projections and the wisdom of being satisfied with such a huge negative cash balance in a fund used to pay Indy's debt.  All I know is I wouldn't want to hold one of those bonds.

TIF Study Commission Recommendation # 5 - Public Access To TIF Accounting

For my fifth choice of a common sense recommendation from the TIF Study Commission, I am bundling a couple of items that are meant to 'establish transparent financial practices, accounting, reporting and monitoring'.

These include creating the types of data that should be monitored for established TIF Districts, including whether goals are being met, creating a standardized database for evaluation of the performance of the TIFs, and making it easily available to the public on a City TIF website.

Remember, Indy's TIF districts :

* consume over one tenth of all the assessed value of all the real estate in Marion County

* generate roughly $100 million in property tax revenues every year

Compare that to the roughly $340 million sent to the City/County coffers from property taxes and you can see what a huge fraction has been set aside, and which the rest of us taxpayers must make up with higher taxes until we hit the protection of the tax caps.

With the gargantuan size of our collective TIF Districts, monitoring them and making the data regarding them public, should be of the highest priority.

The exact wording is (click here and scroll to page 20 of the pdf) :

2) Establish transparent financial practices, accounting, reporting and monitoring. Specifically, the MDC, in coordination with the Controller and Bond Bank, should:

a. Engage a third party review of all TIF financials and documentation to establish a uniform documentation, reporting, tracking and monitoring system and to document Marion County process and practices in a Marion County TIF Handbook; Create a uniform application that will be used to capture TIF information, preserve institutional memory and monitor project outcomes (number of jobs, for example) in comparison to agreed upon outcomes.

b. Build a TIF database for the collection of consistent information which can be used in the evaluation and analysis of TIF transactions and data.

c. Create and maintain a TIF website which would be a repository of the TIF data and information made available to the public.

I can tell you that the lion's share of the data about TIFs that I have gathered over the years has come from the Indiana Department of Local Government Finance, where some must be reported.  Our local "transparent" Ballard administration is very slow to give out information.  So, a website that must be maintained with required data would bring TIFs out of the shadows and into the sunlight.  I am always in favor of that sort of thing. 

Want to see how the money in the TIF near you was spent last year?  Look it up online.  If you don't know what they are doing, how can you voice your opinion and help change the direction, if need be?

Monitoring is important beyond the public access point.  If the City isn't watching what these huge financial vehicles are doing, we stand to get surprised.  More than two people should be able to review the performance numbers, as well.  It bears repeating that, combined, our TIFs cover about 1/10th of all taxable property in Marion County and generate about $100 million in property tax revenue each and every year.  The ongoing health of these districts affect us all - as they are backed with the moral obligation of the City and any associated debt WILL be paid, no matter whether that means services have to be cut to pay off the bonds or not.

TIF Study Recommendation #4 - Council Vote On Excess TIF Revenues

The fourth of what I view as a common sense recommendation of the TIF Study Commission is the one requiring approval by the City-County Council for any expenditure of excess TIF revenues of $1 million or more.  (click here, scroll to page 22 of the pdf; next to last item)

d) Require Council approval for any transfer from a TIF account that exceeds $1 million, unless it is a bond payment.

Of course this makes complete sense.

Had this recommendation been in place, the $8 million that goes annually to the Pacers from the excess funds in the consolidated downtown TIF would have gone to the Council for a vote.  Likely, the Council R's would have been strong armed by Ryan Vaughn to rubber stamp the Mayor's decision, but at least they would have been on the record.

In 2011 alone, along with the Pacers' payment, the Council would also have had to vote on:

$9 million to the Georgia Street project
$3.5 million to the Bush Stadium project
$4.6 million to Angie's List
$3.5 million to City Market project

In 2012 they would have had to vote on some, if not all, of the $40 million being taken from the TIF to balance this year's budget, under the guise of repaying the City for downtown infrastructure improvements.

This kind of oversight is prudent, increases transparency, and gives the public a better chance for evaluating and commenting on the expenditure.  Without it, the excess funds serve merely as a slush fund for a sitting Mayor who is more interested in handing out public funds for private projects than retiring debt and the TIF paying off that debt.

TIF Study Commission Recommendation # 3 : Upfront Criteria and Justification For Creating TIF

My third choice for common sense recommendation of the TIF Study Commission is that there should be a clearly defined evaluation process that provides key information justifying the creation of a TIF district and selection of the key project within that district.

This is what I have been relaying as the justification for "why this TIF - in this place - with this footprint - for this project".

The text of the recommendation is (click here and scroll to page 20 of the pdf):

m. Require a cost/benefit analysis, including a discussion of the following as part of all TIF project applications:

i. Use of a project TIF as compared to a TIF district, which has a wider footprint.

ii. A description of how the project plan aligns with the county-wide comprehensive planning document.

iii. A description of how the project plan aligns with the local/neighborhood planning document.

iv. A market analysis of the existing, possible or likely future free market unsubsidized private development in the proposed geographic area.

v. Analysis of recent changes in the assessed value in the geographic area of the proposed project.

There are several very important aspects to this recommendation. 

First is the question of why this project cannot provide enough growth in AV by itself, and the future tax dollars flowing from this parcel alone is not enough to finance the City's investment?  Why does this project require other property to secure the finances?  There should be reasons for a TIF footprint beyond it being a means to raise further cash.

There is reference to a county wide plan for economic development, which is envisioned as being akin to the land use plan referred to as the 'Comprehensive Plan'.  This is tremendously important.  As things stand now, investment follows influence, not need.  This has led to public mistrust of the motives of those in power to make decisions for TIFs, abatements, and other expenditures of public dollars.  Currently there is no plan, and that is simply absurd when you think about it.

The recommendation for a market analysis to show that public investment is necessary in order to spur private investment in an area is a requirement that is totally lacking today, but would be invaluable to the decision making and public trust that "this TIF, in this place, with this footprint, for this project" is appropriate.  If investment was already occurring in an area, then why take that growth in AV away from the taxing units and away from the taxpayers?

How very common sense is this set of recommendations - let's have a plan, let's set criteria for evaluation of proposed new TIFs, and let's make sure that investment wasn't already going to happen in the area before squandering tax dollars on a particular project.

TIF Study Commission Recommendation # 2 : Protect Taxpayer Investment With Clawback Provisions

My second choice for common sense recommendation of the TIF Study Commission is providing claw backs in the agreement with the chosen developer who is benefiting directly from the TIF dollars.  Goals and claw backs are used constantly for abatements.  But, with abatements you also have the aspect that the 'forgiven' taxes are on increased assessed value that will come with private investment.  So, lower investment, lower assessed value, lower amount of forgiven taxes.

A TIF financed deal is different.  With bond proceeds flowing straight to the project, either for mere infrastructure or directly to the developer to suit their own needs, and future TIF dollars set as collateral to pay back those bonds, there is no protection to the taxpayers that the goals will be met.  So, currently when the developer and, frankly, city officials make promises of private dollars invested or jobs created at such-and-such average salary - they are made in thin air with nothing to protect taxpayers from statement inflation or simple error in judgement.

By enumerating and specifying the investment and jobs goals for the TIF money, and by crafting a way to determine how much money the developer owes back to the City if they don't reach the goals, the taxpayers gain some protection.

Its well past time that the taxpayers stop being left holding the bag when TIF funded projects don't work out as well as City officials and developers say they will, in order to get their hands on the money in the first place.

Here is the wording of this recommendation (click here - page 19 of the pdf):

j. Include claw back provisions in project agreements that are subject to effective oversight and ensure that non-performing projects are quickly remediated through the return of TIF funding when performance goals are not achieved.

TIF Study Commission Recommendation # 1 : All TIFs Should Have An End Date

I am going to spend some blog time posting what I think are the most significant recommendations of the  TIF Study Commission.  As always, check out the lengthy list of recommendations for yourself - click here and view pages xv-xix  of the executive summary (pages 18-22 of the pdf).

My top spot for most common sense recommendation is that all TIFs should have an end date when they are dissolved entirely.

The current situation is that 11 of Indy's 33 TIF districts have end dates and 22 do not.  No word on the status of the 12 TIFs in the excluded Cities.  Three of Indy's TIFs are classified as 'dormant', meaning all property taxes generated by them is flowing through to the taxing units for the time being.  They can be recalled to service at any time by a mere vote of the MDC, as two were last year.  All new TIFs must, by state law, have an end date of no more than 25 years.

Here is the exact recommendation of the TIF Study Commission:

h. Establish Sunset Dates for all TIFs. The Commission recommends the following with respect to TIF districts that are dormant or have no mandatory expiration:

i. Dormant TIF districts: In the absence of overwhelming justification otherwise, the Commission recommends the termination of all three dormant TIF districts.

ii. TIF districts with no required sunset date: In the absence of overwhelming justification otherwise, the Commission recommends the establishment of termination dates based on the last maturity date of the related bonds.

iii. TIF districts without outstanding debt and which are used on a pay-as-you-go basis: in concert with appropriate community development organizations and in alignment with a comprehensive planning document, the MDC should establish a capital spending plan and sunset date no longer than 20 years into the future.

I would wholeheartedly agree with each aspect of this recommendation.  The promise that we will all eventually benefit from the economic development or redevelopment of a TIF district can and should be fulfilled by letting them expire and all revenues flow as regular tax dollars.  This would lower everyone's property taxes and, at the same time, add more dollars to the schools, library, townships, etc, by lowering the number of people who hit the tax caps.

There is little distinction between the perpetual TIF district and a slush fund for a sitting Mayor from which he/she can dole out favors.

Indy Star Editorial Dead Wrong - More Information Needed to Substantiate TIF Expansion

The Indy Star Editorial Board wants you, Mr. and Ms. Taxpayer, and the City-County Council to buy a pig in a poke.  Not just any pig, mind you, its a downtown pig - so who needs details?

In today's Editorial, "Put Mass Ave on faster track", the Board repeats the same old, unfounded and untrue, myths about TIFs to push for the expansion of the consolidated downtown TIF to fund development along Mass Ave.  The alternative they are brushing aside is to actually implement the recommendations of the TIF Study Commission in order to set criteria for the proper evaluation of this TIF proposal.

Where to begin?

Lets start with the idea that before a TIF is created, it is reasonable for those empowered to make the decision to ask for data that demonstrates the need for TIF financing of a particular project.  Information that demonstrates the need for -- THIS TIF - in THIS place - with THIS footprint - for THIS project.

The public has the Council Proposal 15, the text of which lends no information of any value, and the MDC resolution, which I uploaded some time ago to Google Docs.  This resolution includes the  Mass Ave area as expansion #2.  It is 112 acres covering 132 parcels.  Beyond that, there is no information.

So, we do have information on what TIF is proposed, in what place.  But why does the footprint have to be so large?  What exactly is the project to be funded with the proceeds of the TIF expansion?  How much money is the City hoping to contribute to the project?  For what - just streets or are we footing the bill for developer costs? 

A really large question is why this proposed TIF would include the assessed value of EXISTING development.   It begs the question: If those people who invest in such bonds, need not only the security of the best performing TIF in Indianapolis (the downtown TIF) but also tax revenues from existing development in the expansion area - just how risky IS this project and its repayment?

And this leads to another really large question - if there is already development in this area, why do we need to tie it up in a TIF?  What happened to the 'but for' test?  This is the seat of your pants test that can't be described beyond - you just know it when I feel it.  The idea is that 'but for' the TIF financing, the project would not happen.  But development is already taking place here.  The free market is working.

What is the project?  All we know is that there are three finalists in the running - none of which have been disclosed.  In his article in yesterday's Star, Jon Murray reported:

The finalist teams have not been named publicly or their projects released.

Deron Kintner, executive director of the Indianapolis Bond Bank, said the initial proposals were submitted in October, and all the five proposals originally considered as contenders relied upon TIF assistance.

Really?  They ALL proposed TIF revenues as the exact form of government assistance???  Now how did that happen?   But, I get off the point.

We don't know anything about the magnitude of the government (taxpayer) assistance involved, for what, or for whom.  We do know that the City is so loose with money that the broker stands to make $1 million on the deal (see Cory Schouten's article "Mass Ave deal's brokerage fee raising eyebrows")

The TIF Study Commission recommended that key evaluators be applied to any proposed TIF so that it could actually be evaluated.  But, for the Star Editorial Board, this goes too far.  They are content with the limited information currently available, that gives no Councillor and no taxpayer any real tools to take an honest look at whether this TIF is in the best interest of the community at large.

So, where are we?  The Star editorial ignores the fact that we have few specifics with which to evaluate the proposal that the downtown TIF be expanded to include 112 acres and 132 parcels to finance the development of one parcel.

But, the editorial does not fail on that point alone.  They perpetuate the TIF myths once more.

Under TIF, a city locks in a site's property tax contributions at its current level.

I have gone into this several times before.  The base tax revenues are subject to being converted into TIF revenues if the district underperforms for any reason, including recession.  See yesterday's post for some of the gory details.  Suffice it to say, even our holy downtown TIF has 5 of 8 districts whose base has dropped to ZERO.  BUT, this statement is all the more egregious because the proposed Mass Ave district would include already developed parcels in the TIF, deliberately excluding them from the base.

To further attract development, the city also provides enhancements that can include street improvements, parking and landscaping.

Under this Mayor, TIFs are also used to provide $8 million more a year to the Pacers and give a nearly $100 million loan to a developer who could not qualify for a bank loan (the 'but for' test in action) - just to name two deviations from the mundane 'street improvements' meme.

The process certainly can be abused. Some communities have overused the tool, expanding it far beyond what is necessary to promote development. If an area's tax revenue is frozen for too long, schools, transit and other public needs can suffer. 

This is exactly what is going on with the downtown TIF - not just 'some communities' - OUR community.

Further development of Mass Ave and other areas in and near Downtown is needed to attract new residents, who in turn will increase the city's income and sales tax revenues. Those taxes are even more important for cities now that Indiana has capped property tax rates.

Further development of any area of our City will benefit us all.  Why does this area need any government subsidies to develop?  Isn't the free market already attracted to the area?  The Star has provided no justification for any public financing, much less TIF financing.  What is worse, the Ballard administration has provided no justification for any public financing in this area, much less TIF financing.

It's important for Mass Ave, the rest of Downtown and the entire city that the proposed developments be allowed to move forward without further delay.

Actually - NO.  Its important for the entire city that the proposal for any new TIF be clearly substantiated as to why this TIF - why this place - why this footprint - why this project before it is approved.  It is not asking much of our City officials to consider facts; not myths.  The recommendations of the TIF Study Commission need to move forward through the Council and the MDC with all haste, yes.  But any new TIF should wait until the criteria for approval are in place.

It is long past time that we stop relying on the old, untrue promises of TIFs and set up solid criteria for evaluation and monitoring of TIFs in Indianapolis.  The Star Editorial Board should insist on such things, instead of using the fourth estate to help muscle through what amounts to buying a pig in a poke.

Misinformation About TIFs Continue

I understand that the side bars in newspaper articles are supposed to quickly convey the high points of the longer article.  But the sidebar in today's story about the proposed expansion of the Consolidated Downtown TIF district continues the same old myths about TIF districts that have misinformed the public for decades.

In the article itself, reporter Jon Murray does have the space to get it right, but the sidebar does not do the public any favors.  Murray is an outstanding reporter, in my view, who is very keen to be absolutely accurate.  I think the reason the sidebar is incorrect is the pervasive misconceptions about TIF districts that have been promulgated for decades remain entrenched.  The TIF Study Commission revealed TIF's true nature, but the findings will take time to sink in.

The article is titled "Residential/retail plan for Mass Ave. triangular block has setback in City-County Council".  The sidebar is provided in the print version only.

The sidebar tries to give a snapshot of what a TIF district is.  Under "How They Work" is:

The level of property taxes collected prior to the new development being built still is sent ot schools, libraries, IndyGo and other local government units.  Once the district is disolved, all taxes collected flow to those units.

First, the level of taxes collected prior to the creation of a TIF district does not necessarily continue to flow.  This level is called the 'base'.  But, if the TIF does not perform or if there is a drop in assessed value, some or all of the base will be converted into TIF revenue and no longer flow to the taxing units (see "TIF Districts - Who Knew The Base Could Drop?")  In fact, in the one year between 2010 and 2011, there was an aggregate drop of $43.4 million assessed value in Indy's TIF districts.  14 Indianapolis TIFs had dropped to a base of ZERO by 2011.  The much vaunted, high flying, consolidated downtown TIF had 5 component TIF districts at zero base by 2011, of 8 total (I have information on 7 of the 8 component districts).  That year alone, the 7 component districts for which I do have information, the remaining base lost about $10 million more.  So, no, the base will not necessarily continue to flow to the taxing units - even in the best performing TIF district we have.

The second is technically correct - but it begs the question of whether or not the district will ever be dissolved so that all of those taxes can flow like regular property taxes, easing the burden on all of us taxpayers, as well as restoring funds to the taxing units that got caught in the tax caps.  21 of the Indianapolis TIF districts are not required to be dissolved EVER.  11 of the Indy TIFs do have a drop dead date.  Any TIF district created in the future is now required to be dissolved within 25 years of the date of creation.
In the full article Murray does complete the thought:

At the root of critics' concerns are tax-increment finance (TIF) districts, which have kept schools, libraries and the IndyGo transit agency, among other local governments, from benefiting from new developments' tax contributions. That's because the growth in property tax collections that those improved properties spur is diverted for years or even decades to support further development -- sometimes indefinitely, in the case of Downtown.

These are the two promises that are traditionally made to the public to tamp down any remonstrance - the idea that nothing will change with the current tax situation, and we'll all benefit down the road once the TIF is no longer needed.  The TIF Study Commission found out that these promises are routinely not kept and among their recommendations is that all existing TIFs be outfitted with a dissolution date matching the longest outstanding bond obligation of that TIF.  The erosion of the base is not so easily dealt with, but if we could avoid sounding like it doesn't erode, that in itself would be helpful.

Councillor Mahern Hits Homerun at Today's McANA Meeting

Councillor Brian Mahern, who conceived of and served on the TIF Study Commission, was McANA's guest speaker this morning.  He did an absolutely masterful job of conveying, in plain English, the breadth and depth of the Commission's work - from what a TIF district is, to what policy recommendations the Commission made for its establishment and operation.  Throughout the lengthy question and answer period, he folded in the rational for the Commission's recommendations along with how TIFs currently operate.  Not once did he get into the weeds - and this topic lends itself to getting mired in complicated details.

If you don't have the time, energy, or overwhelming interest in TIFs to watch all 24 hours of archived WCTY broadcasts of the TIF Study Commission meetings, or the time, energy, or overwhelming interest to read all 96 pages of their report plus all appendices - then the WCTY broadcast of this meeting may be just the perfect morsel that can bring you up to speed on the topic (forgive my mixed metaphors).

WCTY will begin showing the McANA meeting early this week - from past patterns begin looking for it on Tuesday.

Today's McANA meeting clearly demonstrates the public interest in TIFs and how the public wants them to operate within Indianapolis. Remember, TIFs consume your tax dollars, so you owe it to yourself to become somewhat conversant about the topic, as well as making your opinions known as the policy recommendations move toward adopted and implemented policy practices.

TIF Study Commission - TIF FAQs

The recently concluded TIF Study Commission has posted a very impressive document summarizing the findings of the Commission as well as recommendations for public policy modifications regarding TIF creation and management in Indianapolis. You can access the 96 page report, as well as the appendices.

For this entry, I am going to summarize what I thought were the ten most important findings of the Commission.  Of course, this is my opinion and it will undoubtedly be valuable for you to scan through the document's executive summary, if you aren't going to try to digest the entire report.

1) TIF (tax increment financing) is a development tool enabled in all States, except Arizona, and the District of Columbia.  The type of taxes collected, the footprint of the districts, and the uses for TIF money are all types of things that vary between States in the creation and management of TIF districts.

2) While many believe the base (the existing assessed value on the day a TIF district is created) continues to provide it's property taxes to Indianapolis' various taxing units, that is not necessarily or usually true.  The base can erode and be converted into part of the TIF itself.  Additionally, any growth in the value of the base due to improving market value, always goes into the TIF.

3) There are many types of TIFs here in Indianapolis, with a variety of purposes.  There are TIFs that accumulate funds, then spend them - as well as TIFs that are used to float bonds which promise the expected new tax revenue stream for repayment.  There are TIFs created to encourage redevelopment in older areas and new development in thriving areas.

4) TIF funds are spent on a wide variety of projects.  While most of the public may assume that roads and other basic infrastructure is what TIF funds are used for, that is just the beginning.  TIF funds are used to build buildings, make loans to developers, repay previous city expenditures (so that the money could be used to fund the 2012 city budget), pay money to the CIB (so they can send the money on to the [cough, cough, Pacers] ICVA), build housing, and make other improvements in business areas.

5) State law recently changed, requiring that no new TIF district exist for more than 25 years.  TIFs established prior to to the change can live forever - this would include all of our current TIFs, unless their establishment included a 'drop dead' date.

6) Some TIFs district bonds guarantee repayment with more than the property tax revenue stream created by the TIF.  For instance, the airport TIF for United promised County Option Income Tax revenues for the repayment, when property taxes were insufficient.

7)  When a TIF district is accumulating more money than is needed to repay the bonds or needed for further projects within the district, the City can pass the excess "through to the base" (to the other taxing units).  This process is annual and each year's decision is independent; if the City decides to pass $10 of the excess through to the base this year, they can change their minds next year and keep the $10 in the TIF.

8) TIF districts that do not have an expiration date can become 'dormant' and all of the property tax revenue passes through to the base.  A dormant TIF can be reactivated with only the approval of the MDC.

9) There are other economic development tools that can be used to encourage development, redevelopment, or ongoing infrastructure improvements besides TIF districts.  This includes general obligation bonds, like those used for the new Wishard Hospital project,as well as abatements and other incentives.

10) There is a key mathematical relationship between TIF district property tax revenues and the amount of money the taxing units lose due to the property tax caps.  The more property tax revenue diverted to TIF district funds, the greater the loss of revenue to all taxing units.

There is one more piece of information presented to the Commission that I think is striking and has importance well beyond the TIF district policy discussions.  Lets call this item number 10+.  That was the idea planted by Brad Beaubien, Director Ball State College of Architecture and Planning, Indianapolis Center (see "A Clip From The Latest TIF Study Commission Meeting").  He said that Indianapolis avoided the urban core decay that challenged many cities decades ago, by establishing Unigov.  Unigov brought in a huge number of acres of undeveloped land which provided ever increasing revenue to the City as that land was developed.  That process is now nearly over, and Indianapolis is now in the situation that the other cities were back in the 60's.

As anyone can plainly see, I've limited the information gathered by the Commission to just 10 items.  This is keep things as simple as possible, while, hopefully, not oversimplifying things.  All of the Commission meetings are archived on WCTY's website and the final report is well written, if thick.  I recommend either and both to anyone interested in wading through it all.  If you are interested in these things, it will be worth it.